RealTime IT News The Dog Still Has Fleas

This year, the IPO market has been torrid. Yet, there have been some stinkers. One has been . Basically, investors have abandoned this one. In the IPO, the stock was offered at $11. Now, the stock is trading at a lowly 7-1/32.

But yesterday, the company found some shelter. Analysts from Merrill Lynch and Thomas Weisel initiated coverage of the stock, giving out "buy" recommendations. Then again, both firms were underwriters of the IPO. On the news, the price of (IPET) was up only 29/32.

Of course, the e-tailing market is under extreme pressure. There is much concern that these companies will never make money - especially as brick-and-mortar giants enter the fry. Instead, investors would rather put their cash in more exotic areas, such as business-to-business, infrastructure and even biotech companies.

It is undeniable that the pet market is massive. In the US, it is about $23 billion per year. What's more, people love their pets and, as a result, are willing to spend money on them.

So far, has been gaining lots of momentum. In fact, is a strategic investor in the company.

But is being unnecessarily punished? Is it an opportunity at current valuations? I don't think so.

The pet marketplace is not ideal for e-commerce. For example, the biggest selling category for is pet food. Unfortunately, the cost of shipping pet food is expensive and a drag on margins. Although, has begun selling private-label food, which sells at higher margins.

But I think the biggest problem with is the widespread competition. faces such formidable opponents as,, and There is also indirect competition. For example, when Wal-Mart's online operations are in full-swing, pet supplies will be a major category.

Competing in this crowded marketplace requires huge sums of marketing dollars. In fact, has undergone a major advertising campaign, involving expensive commercials. However, it is unclear whether ".com" commercials make any sense.

No doubt, has a great site. It has strong backers. It has a potentially big market. Unfortunately, it will likely take several years for the company to make any money - and this may be too long for investors to wait.


Can become the online market leader in this niche? Billy B wrote: "Is the only one with fleas? What about the underwriters?" Discuss it here

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